Getting pre-approved is the next step after
pre-qualified, and it
tends to be much more involved. You'll complete an official mortgage application(and usually pay an application fee), and then supply the lender with the necessary
documentation to perform an extensive check on your financial background and
current credit rating. (Typically at this stage, you will not have found a house
yet, so any reference to "property" on the application will be left blank).
From this, the lender can tell you the specific mortgage amount for which you
are approved. You'll also have a better idea of the interest rate you will be
charged on the loan and, in some cases, you might be able to lock-in a specific
rate. With pre-approval, you will receive a conditional commitment in writing
for an exact loan amount, allowing you to look for a home at or below that price
level. Naturally, this puts you at an advantage when dealing with a potential
seller, as he or she will know you're one step closer to obtaining an actual
mortgage.
Pre-Qualified
Getting pre-qualified is the initial step in the mortgage process, and it's
generally fairly simple. You supply a bank or lender with your overall financial
picture, including your debt, income and assets. After evaluating this information,
a lender can give you an idea of the mortgage amount for which you qualify.
Pre-qualification can be done over the phone or on the internet, and there is
usually no cost involved. Loan pre-qualification does not include an analysis
of your credit report or an in-depth look at your ability to purchase a home.
The initial pre-qualification step allows you to discuss any goals or needs
you may have regarding your mortgage with your lender. At this point, a lender
can explain your various mortgage options and recommend the type that might
be best suited to your situation.
Because it's a quick procedure, and based only on the information you provide
to the lender, your pre-qualified amount is not a sure thing; it's just the
amount for which you might expect to be approved. For this reason, a pre-qualified
buyer doesn't carry the same weight as a
pre-approved buyer who has
been more thoroughly investigated.